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Exhibit 2.1
PLAN
OF COMPLETE LIQUIDATION
OF
FOOTSTAR, INC.
This
Plan of Complete Liquidation (the “Plan”) is
intended to accomplish a complete liquidation of Footstar,
Inc., a Delaware corporation (the “Company”), in
a manner that satisfies Section 331 of the Internal
Revenue Code of 1986, as amended (the “Code”), as
follows:
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1.
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Scope of Plan . The Plan provides for the
complete liquidation of the Company by providing for a series of
distributions of cash to the stockholders of the Company (the
“Stockholders”) generated from cash on hand, the sale
of certain assets and the wind-down of the Company’s business
as described in the Plan, including the submission of a plan of
dissolution to the Company’s Stockholders in 2009 after
expiration of the Company’s agreement with Kmart to
exclusively operate the footwear departments in all Kmart stores
through the end of December, 2008 (the “Kmart
Agreement”).
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2.
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Adoption of Plan by the Board of Directors . The
Board of Directors of the Company (the “Board”) intends
to adopt the Plan at a regular or special meeting of the Board or
pursuant to a unanimous written consent. The Plan shall
constitute the adopted Plan of the Company on the date on which the
Plan is formally adopted by the Board at such a meeting or pursuant
to unanimous written consent (the “Adoption
Date”).
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3.
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Liquidation of the Company’s Business . As
part of its emergence from bankruptcy in February 2006,
substantially all of the Company’s business operations were
related to the Kmart Agreement. At the end of such term the Kmart
Agreement provided for the purchase by Kmart of the
remaining inventory in the Kmart footwear departments at
which time the Company would be forced to liquidate unless it
identified, developed or implemented a viable business alternative
to offset its Kmart business. Following its emergence
from bankruptcy, the Company’s Board of Directors (the
“Board”), with the assistance of investment bankers,
evaluated a number of possible alternatives to enhance shareholder
value, including acquisition opportunities, changes in the terms of
the Company’s principal contracts, including the early
termination of or extension of the Kmart Agreement, the payment of
one or more dividends, and the sale of our assets or
stock. As of early 2007, the Board determined the
best course of action was to operate under the Kmart Agreement
through its expiration in December 2008, unless earlier
terminated. In March 2007, the Company engaged a real
estate broker in order to sell its headquarters
building.
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In
2008, Kmart and the Company entered into discussions with
respect to the termination of the Kmart Agreement and the sale
of certain intellectual property to Kmart.&
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